According to HMRC, over £2 billion has been collected from users of tax avoidance schemes as a result of new government measures to collect disputed tax upfront.

New Accelerated Payments notices mean that users of tax avoidance schemes pay disputed tax up-front while their tax-affairs are investigated, instead of waiting until they are concluded. Given HMRC wins 80% of cases that go to court, this eliminates the financial advantage that tax avoiders previously enjoyed.

The Financial Secretary to the Treasury, David Gauke, said:

We will not tolerate tax avoidance and Accelerated Payments has been a real game changer.

HMRC already wins the vast majority of cases that go to court and now HMRC has taken more than £2 billion from tax-avoiders who would have otherwise benefitted from that cash while they were being investigated.

It should be absolutely clear to anyone who is tempted by these schemes that tax-avoidance does not pay.

HMRC is now issuing over 3,000 Accelerated Payment Notices a month, and has issued over 41,000 notices since Accelerated Payments were introduced. By the end of 2016, HMRC expects to have completed issuing notices, bringing forward over £5 billion in payments for the Exchequer by March 2020.

Accelerated payments were introduced in the Finance Act 2014 and National Insurance Contributions Act 2015 and they apply where avoidance schemes are subject to the Disclosure of Tax Avoidance Schemes rules or the General Anti-Abuse Rule, or where they are similar to a scheme that’s already been defeated in the courts.

An accelerated payment notice is issued to the taxpayer to collect the outstanding tax. Once they receive the notice, they have 90 days to pay or make representations to HMRC if they consider the notice is incorrect – either if the conditions are not met or the amount is wrong.

A reminder that it is not too late to avoid the hefty car fuel benefit charge if you drive a company car and your employer pays for your private fuel.

Many employers have an arrangement with their company car drivers to obtain reimbursement of any private fuel provided. Usually, the employee must reimburse the employer for private fuel included in petrol bills paid by the employer. Otherwise, the employee may face a tax charge.

 Consider the following example:

If your private mileage for March 2016 is 600 miles, and you drive a 1900cc diesel engine car, the rate per mile to cover fuel charges, as quoted in the latest rates published by HMRC, is 11p per mile. Accordingly, you should repay £66 to your employer. In order to exempt yourself from the car fuel benefit charge you must be able to demonstrate that the refund was actually made in the relevant tax year, in this example before 6 April 2016. In practice, HMRC may give you more time…

Based on the above example, if the vehicle’s list price when new was £30,000, and the car benefit charge rate was 26% (based on a 130g/km CO2 rating) the benefit in kind charge for 2015-16 would be £7,800. With no repayment of private fuel, there would also be a £5,746 car fuel charge. Both these amounts would be added to your taxable income for the year. If you were a higher rate tax payer the car fuel charge would cost you £2,298 a year in additional tax (£5,746 x 40%). This amounts to £192 per month.

If your actual private mileage proved, on average, to be 560 miles a month, you would therefore save £126 per month (£192 – £66).

It is worth crunching the numbers. Obviously, the lower your private mileage, the more likely a repayment system will save you money. 

From 1 April 2016, landlords who acquire new property to let as residential accommodation will be required to pay SDLT at significantly higher rates. The increase is also expected to apply to private householders who buy a second home.

The new rates will be:

*SDLT rates apply to the nominated bandings apart from properties purchased over £40,000 and up to £125,000 which will pay 3% on the total purchase price from 1 April 2016. Published information from the Treasury on these SDLT changes is thin on the ground, but informed opinion would seem to indicate that the additional 3% charge will not apply if you replace your main residence or if you are a significant corporate or fund investor in residential property.

A property purchased for £275,000 that is subject to the new rates will see an increase in SDLT from £3,750 (on property purchased prior to 1 April 2016), to £12,000 if purchased after 1 April 2016.

If you are presently negotiating to buy a new residential property for letting, or a second home, make sure that your advisors complete before the end of March 2016.

Despite generating substantial profits from sales of online services to individuals and businesses in the UK, Google is perceived to be avoiding tax on these profits in the UK.

Press commentary has highlighted the use of off-shore tax vehicles to divert Google’s profits in the UK into lower taxed countries: Ireland and Luxembourg have been mentioned.

Recently, Google agreed a multi-million pound settlement with HMRC to bring all its UK liabilities up-to-date for the last ten years. To many observers this seemed to be a fraction of the amount of tax that was due, and the so-called “sweetheart deal” has been robustly denounced.

HMRC have now published their side of the story, at least as far as they are prepared or able to disclose. They said:

“The Google enquiry

On 22 January 2016, Google announced that it had reached agreement with HMRC to pay an additional amount of £130 million in corporation tax and interest, as a result of HMRC’s investigation which started in 2010. This sum is over and above the tax that they have paid for past years (or would pay for the current period were it not for HMRC’s enquiry). The current tax charge that Google took in its accounts increased significantly from 2012, when the company first disclosed that it was under enquiry and made a provision for additional tax.

Some commentators have applied Google’s group profit margin to its sales to UK customers and estimated that Google’s UK corporation tax is equivalent to an effective tax rate of around 3% on the group’s profit’s arising in the UK.

This calculation does not reflect how tax law works.

Under international tax rules, Corporation Tax applies to profits created from economic activities carried on in the UK, not to profits from sales to customers in the UK. Many elements contribute to a multinational business’s economic activity and thus generate the profits, including the work that staff do, the technology driving and used by the business, intellectual property and other assets as well as where those assets are developed and actively managed.

Example

Imagine that a UK car manufacturer builds its vehicles in the UK, but half of its profits come from sales in the United States. Under Corporation Tax rules, the manufacturing profits would be taxed in the UK, the place of the economic activity, not the USA, where the consumers are.

In accordance with our published guidelines on resolving disputes, HMRC has taxed all of Google’s profits chargeable to tax in the UK for the period in question, at the full statutory rate of tax.

There has been media speculation about what other European tax authorities are doing regarding Google. We can’t comment on enquiries carried out in other countries, or on media speculation about them. So far, there has been no public confirmation that other countries have concluded enquiries with Google, either by agreement or by litigation. HMRC is satisfied that our enquiry has secured all the tax that is due in the UK.”

The dispute seems to be over as far as HMRC and Google are concerned, but it is unlikely that the owners of UK based companies, who do pay tax on profits generated by sales in the UK, will see this as justice…

If your company has a 31 March yearend, you only have a few weeks to consider available planning options that may save you tax for the current financial year 2015-16. There are also a number of practical matters that should be considered. They include:

Directors

• Are there any monies owed to the company by directors?
• If the amounts owed exceed £10,000 has interest been charged on any balances owing? If not, beneficial interest will need to be declared on form P11D for 2015-16.

Dividends

• Is the correct paperwork in place: dividend vouchers and board minutes?
• Have dividends been paid out of distributable reserves?
• Have all dividends voted been paid or credited to a loan account?

Salaries

• Were any outstanding salaries or bonuses claimed in the 2014-15 accounts paid within 9 months of the year end? If not, the deduction for corporation tax will be disallowed.
• Have bonuses been considered for 2015-16? Would it be prudent to defer voting bonuses to assist with personal tax planning issues? For example, reducing taxable income for 2015-16 may save tax allowances if the intended bonus increased total income above the critical £100,000 ceiling.

Company car users

• Have steps been taken to recover the full cost of any private fuel paid to company car users during 2015-16? This needs to be completed by 5 April 2016 to avoid possibly significant car fuel benefit charges for the employee and NIC Class 1a contributions for the company.

Pension contributions

• Make sure that any company contributions for 2015-16 clear the company bank account before the yearend.

Deferring significant costs or fixed asset investment

• Consider deferring or bringing forward, significant revenue costs (for example allowable repairs to plant or other equipment).
•  Consider deferring or bringing forward, significant capital costs (for example equipment or commercial vehicles).

Losses

• Consider tax strategies to take advantage of past or current year losses.

This list is by no means conclusive. Please contact us if you would like to set-up a planning meeting. The sooner the better – the clock is ticking…

The following announcement was posted to the GOV.UK website 1 February 2016:

“The Valuation Office Agency (VOA) is in the process of updating the rateable values of all business properties. This is known as a revaluation. If you register your email details with us now we will email you when the draft rateable values are available to view on gov.uk in October 2016.

• Register your email at www.gov.uk/voa/revaluation

This will be your chance to let us know if the information we hold about your property is incorrect. If you don’t review your details you may find yourself paying an incorrect amount in business rates.

Rateable values are used by local councils to calculate business rates, and business rates bills will be calculated using the new rateable values from 1 April 2017.”

As this process may have significant cost implications it may be worthwhile to take an in-depth look at your present business rate criteria to ensure that come 1 April next year, the VOA’s reassessment does not result in incorrect, and possibly increased, business rate bills.

Earnings over £100,000?

If your taxable earnings for 2015-16 are likely to exceed £100,000, perhaps for the first time, now would be a good time to consider your tax planning options before 6 April 2016.

For every £1 your income exceeds £100,000 your income tax personal allowance will be reduced by £2. In effect, when your income reaches £121,200 you will no longer qualify for this allowance.

This would have a dramatic effect on the income tax charged on this top slice of income: from £100,001 to £121,200. The effective rate of tax charged would be 60%.

Accordingly, any steps you can take to reduce your income below £100,000 will save you £600 for every £1,000 reduction.

Earnings over £50,000

When the adjusted income of either parent exceeds £50,000 the family entitlement to child benefit reduces by 1% of the benefit for every £100 the income of the highest earner exceeds £50,000.

In plain English, this means that when the income of either parent is £60,000 or more the financial benefit of claiming child benefit is lost entirely.

It is worth reviewing income levels now to see if adjusted income can be reduced below the £50,000 threshold before 6 April 2016.

Possible strategies to keep you below this level include:

• Increase pension contributions
• Transfer income producing assets to a spouse or civil partner
• Make additional gift aid payments to increase your basic rate band
• There may also be opportunities for some tax payers to shelter income in a limited company
• If parents are in business together, change profit share arrangements to equalise incomes

Take advice to see if you can reduce adjusted income of parents for 2015-16 below £50,000. This will ensure there is no claw-back of your child benefits received. For a family with two school age children, benefits at risk would amount to £34.40 per week, £1,788.80 per annum….

The government has published an update of the various grants and support available to individuals and businesses affected by flooding in recent months. The announcement is reproduced below:

Government support for homes, businesses, farmers and councils

In total the government’s investment in recovery from Storm Eva and Storm Desmond now amounts to nearly £200 million.

Households and businesses

The Floodline Service on 0345 988 1188 helps people affected by the recent floods. Before calling, please read our guidance for households and businesses or farmers.

We are:

• helping the people directly affected by the floods – providing local authorities with over £500 for each household affected; for example, to help with temporary accommodation costs whilst we work to get people back into their homes
• support people as they protect their homes against future floods by providing grants of up to £5000, so they can install new flood barriers, replace doors and windows with water resistant alternatives, or move electricity sockets up to a safer level
• ensuring flood affected businesses that have had their trading disrupted can get back on their feet, with funding equivalent to £2,500 provided to local authorities for each business affected
• ensuring that flood affected communities will not face Council Tax or business rates bills for their homes and businesses for as long as they are out of their properties

Farmers

Farmers affected by the recent flooding in Cumbria, Northumberland, Lancashire, Yorkshire and Durham can get grants worth up to £20,000 to help restore damaged agricultural land under the Farming Recovery Fund. Farmers experiencing difficulties getting online can call the Rural Payments helpline on 03000 200 301.

The Rural Payments Agency has published guidance about farm inspections, animal movements, TB testing, impacts on Basic Payment Scheme eligibility, and other Cross Compliance requirements.

The NFU has produced a newsletter for members affected by the flooding in the North East and North West. It contains information on where advice and funding is available to help with the recovery operation.

Roads, transport and flood defences

We have announced that we will provide £40 million of funding to help repair flood-damaged roads and bridges in Cumbria and Lancashire. We have also announced £3.3 million for Tadcaster bridges and £5.5 million to repair Elland Bridge in Calderdale.

We’re providing an additional £10 million so that the Environment Agency can repair flood defences that were damaged by Storm Desmond and we have announced a package of more than £40 million to rebuild and improve flood defences in the aftermath of Storm Eva. Of this, £10 million will be reserved to improve the Foss Barrier protecting York, which was overwhelmed at the height of Storm Eva. The other £30 million will be spent repairing defences on the Wharfe, Calder, Aire, Ouse and Derwent. It will include repairs to pumping and barriers and clearing blockages in rivers.

Tourism

The Prime Minister announced, on 28 January 2016, a support package to boost tourism across flood-hit north.

Charities

The government will support charities helping those caught up in each of the two recent storms by matching every pound of the first £2 million raised in each case. Applications for Storm Desmond or Storm Eva can be made by any registered charities currently running a fundraising appeal for flood relief to benefit each of the affected areas. The deadline for applications is 5 February 2016.

Sports facilities

Sport England has an emergency flood relief fund now amounting to £400,000 to help people repair sports pitches and facilities destroyed by this winter’s unprecedented rainfall. This will help clubs, local authorities and other community sports organisations in affected areas to help pay for emergency repairs to damaged facilities such as rugby and cricket pitches, water sports centres, pavilions, changing rooms and floodlights.

 1 February 2016 – Due date for Corporation Tax payable for the year ended 30 April 2015.

 19 February 2016 – PAYE and NIC deductions due for month ended 5 February 2016. (If you pay your tax electronically the due date is 22 February 2016)

 19 February 2016 – Filing deadline for the CIS300 monthly return for the month ended 5 February 2016.

 19 February 2016 – CIS tax deducted for the month ended 5 February 2016 is payable by today.

 1 March 2016 – Due date for Corporation Tax due for the year ended 31 May 2015.

 2 March 2016 – Self Assessment tax for 2014/15 paid after this date will incur a 5% surcharge.

 19 March 2016 – PAYE and NIC deductions due for month ended 5 March 2016. (If you pay your tax electronically the due date is 22 March 2016)

 19 March 2016 – Filing deadline for the CIS300 monthly return for the month ended 5 March 2016.

 19 March 2016 – CIS tax deducted for the month ended 5 March 2016 is payable by today.

As implied in the CGT planning article above, the 31 January 2016 was not only the deadline for filing your Self Assessment return online, it  was also the date when any underpayment of Income Tax, Class 4 NIC and CGT for 2014-15 fell due for payment, together with your first payment on account for 2015-16.

If you made your payment on time there is no need to read the rest of this article. If you didn’t, and your payments remain outstanding, read on…

• Interest will be charged at 3%, plus potential penalties as follows:
• If your tax is still unpaid by midnight 2 March 2016 you will be charged a penalty amounting to 5% of the tax unpaid
• If your tax is still unpaid by midnight 1 August 2016 you will be charged a further penalty amounting to 5% of the tax unpaid
• If your tax is still unpaid by midnight 1 February 2017 you will be charged an additional penalty amounting to 5% of the tax unpaid.

These penalties apply to the balance owing for 2014-15 and can be increased to 100% of your tax bill if you deliberately don’t pay it.

Of course, you might not get the later penalties – HMRC may have sent round the bailiffs!

So, taxpayers who are financially stretched, and will be paying their tax late, would be advised to call HMRC and agree an affordable payment plan. In that way, they should be able to avoid penalties if they keep up with agreed repayments.